Market Summary

Yield Movements

Local currency (LCY) government bond yields in the Republic of Korea rose for most maturities between 2 June and 29 August on changing expectations of when the Bank of Korea (BOK) would resume monetary policy easing. The BOK left the base rate unchanged at 2.50% at its 10 July and 28 August meetings, following a 25 basis points rate cut in May, amid uncertainty in the domestic economic growth outlook and as it continues to monitor developments in household debt and housing prices.

Local Currency Bond Market Size and Issuance

The Republic of Korea's LCY bonds outstanding grew 1.4% quarter-on-quarter (q-o-q) to KRW3,370.4 trillion at the end of June, supported by higher growth in both the government and corporate bond segments. Corporate bonds outstanding increased 0.3% q-o-q, following a 0.1% q-o-q contraction in the previous quarter, due to a rebound in issuance. Meanwhile, government bonds rose 3.5% q-o-q driven by higher issuance. Total LCY bond issuance rose 11.3% q-o-q to KRW277.6 trillion in the second quarter of 2025 amid the government's expansionary fiscal policy and monetary policy easing.

Sustainable Bond Market

The Republic of Korea's sustainable bond market grew by 1.0% q-o-q to reach a size of USD184.9 billion at the end of June, mainly comprising social bonds and green bonds. Social bonds, of which almost three-quarters came from the public sector, comprised a majority (54.9%) of the total sustainable bond market. Meanwhile, green bonds, which were mostly issued by the private sector, had a share of 28.1% at the end of June.